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Here are the Frequently Asked Questions
about Living Trusts, Probate and Taxes along with their
answers:
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If I have a will, why would I want a
living trust? |
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A will is a one-way ticket
to probate if the estate has assests of $100,000 or more. Wills often must be formally verified or proven by a
probate court and result in substantial probate fees being paid.
A living trust is almost always the best way to plan an estate
because it avoids the probate process and all probate fees. The
probate process often takes ten to fifteen months, whereas with a
living trust, property can usually be distributed within one
week.
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Can a living trust save on estate
taxes? |
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Yes. While this is not
always the case, many people are in a position to save on estate
taxes by use of a well drafted living
trust.
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What happens if I have no living
trust or will? |
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The state has written a
will for you that you may not like. It goes into effect
automatically when a person fails to make their own estate plan.
Probate and probate fees are
included.
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Why should probate be avoided by use
of a living trust? |
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In addition to the fees
and lengthy administrative process, probate is a public process. It
is not confidential as with a living trust. All members of the
public have access to all information including who is receiving
what property. Also most important, with a living trust, family
living expenses can be provided almost immediately. With a will, the
court must evaluate and approve the distribution of family living
expenses.
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Will owning property in joint-tenancy
avoid probate? |
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It will postpone it until
the second person dies, at which point, probate will be required. In
the event of simultaneous death (such as in an auto accident),
probate will not be postponed.
Joint tenancy has other possible disadvantages as well. It can
result in a loss of control over the assets and may have severe
adverse tax consequences. It is not the best estate planning
method.
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Is a living trust valid in every
state? |
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Yes. It is valid in most
other countries as well.
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Is a living trust
expensive? |
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Does it make sense to have a living
trust if I am not married? |
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Yes. If you want to avoid
probate, you should have a living
trust.
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Can two unmarried people who are
living together have a living trust? |
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Yes. This is quite common
and often makes sense.
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If my child dies before me, does his
or her spouse become the beneficiary of that child’s share of my
estate? |
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It's up to you, but in
most cases the answer is no. Usually the share goes to the children
of that child (your grandchildren). If the deceased child has no
children, usually the share would be divided among your other
children. The formula is entirely up to
you.
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Do I still have control over the
property in my living trust? |
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Absolutely. As trustee of
your trust, you can do anything you could do
before.
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Can I leave part of my estate to a
not yet conceived child or grandchild? |
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Yes. This can be
accomplished easily with a living
trust.
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Can I use my living trust to provide
long-term care for a disabled child or
grandchild? |
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Yes. A living trust is the
perfect tool to use for long-term care of any
type.
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Most definitely. A
properly drafted living trust can provide for the long-term care of
your pet after you are gone.
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How difficult is it to change my
living trust? |
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It's very easy. Changes
are made by simple amendment as long as you are
living.
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Can my successor trustee make changes
to my living trust? |
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No. Upon your death, the
right to make changes ceases. The living trust becomes irrevocable
and the trustee is under a legal duty to fulfill every instruction
in your trust document.
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Is the cost of a living trust tax
deductible? |
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In most cases the cost is tax deductible. See your tax preparer
for details.
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If I transfer my home to a living
trust, can I still deduct the interest? |
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Absolutely.
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What assets should be transferred
into my living trust? |
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Everything other than life
insurance policies, IRAs, Keoghs and other pension plans. Usually
your living trust will be named as a contingent beneficiary for
these types of assets.
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Can my mortgage lender "call my loan
due" if I transfer my home into a living
trust? |
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No. The lender’s position
remains the same and they cannot call the loan
due.
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By transferring my home into a living
trust, will I cause a reappraisal under California’s Proposition
13? |
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Absolutely
not.
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Should my life insurance policies be
owned by my living trust? |
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No. In most cases, the
living trust should be named as beneficiary of all policies. This
will eliminate the risk that the named beneficiary (or
beneficiaries) could die simultaneously with the owner of the
policies, thus subjecting the insurance proceeds to probate. The
policies should be owned by the
insured.
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Should my IRAs and Keoghs be placed
into my living trust? |
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A living trust should
never own your IRAs and Keoghs because such a transfer would be
equivalent to an outright distribution. Thus, it would have negative
tax implications.
Most people name their spouse as beneficiary and their living
trust as contingent
beneficiary.
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If married, what happens if I have
separate property. |
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Separate property is still
transferred into the living trust. The assets will retain their
character of separate property by use of a "Separate Property
Agreement".
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If I have a living trust, will I
still need a will? |
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Yes. A pour over will
makes sense for most people. It transfers any property left outside
the trust at death to the living trust. While such property may
still be subject to probate, it can at least be distributed as part
of your overall estate plan.
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Do I need an
attorney? |
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Yes. Only an attorney can
give legal advice. It never makes sense to take unnecessary risks
with your assets and estate
plan.
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My parents refuse to form a living trust even though
they are getting older. My brother and I who will inherit our parent's property want to avoid paying thousands of
dollars in unnecessary probate fees and want to avoid the long court proceeding
that we will certainly face if they don't form a simple living trust. What do you suggest? |
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You can prepay the cost of a living trust for your parents and then arrange an appointment for them to see an estate planning attorney. This should make them realize how very important proper planning is to their family and should eliminate any excuse to delay protecting their family.
See Living Trust - Gift Certificate.
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I desperately need a living trust to protect my wife and children but am short of cash. Will your firm consider barter? |
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Yes. Our firm will consider accepting the following types of property in exchange for legal services: Advertising, California Land or other Real Property, Trust Deeds, Antiques, Political or Historical Memorabilia, Classic Cars, LLC Interests, LP Interests, Stock in Small Corporations, High Quality Jewelry, or Restaurant Gift Certificates. Since our need for services will vary over time, please call to discuss the barter of your goods and / or services for legal services.
When goods or services are accepted in exchange for legal services, both parties exchange their services based upon the fair market value of the service provided. The IRS requires that the fair market value of goods and services traded must be included in the income of both parties.
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For additional information on living trusts or
other legal services,
please contact us.
Statistic
There are approximately 315,000,000 people in the United States. One hundred percent of us are going to die. Only a small fraction of the population knows when they will die. This is only one of the reasons estate planning is so important.
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